Customs, Excise and Gold Tribunal - Mumbai
Otis Elevator Co. (India) Ltd. vs Commissioner Of C. Ex. on 31 October, 2003
Equivalent citations: 2004(163)ELT62(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. The application is for waiver of deposit of duty of Rs. 3.13 crores and equal penalty.
2. The applicant is absent and unrepresented despite and has not sought adjournment. The application was earlier adjourned on 25-7-2003 on the ground that the Counsel for the applicant was busy in the Supreme Court. We have therefore read the stay application and other relevant papers and the departmental representative.
3. The applicant is a manufacturer of lifts, their parts and is also engaged in the maintenance of such lifts. The demands relates to the period from April, 1997 to December, 2001. Presumably since there is no sale of the goods, the applicant determined the duty in terms of Rule 6(b)(ii) (or Rule 8 of the Valuation Rules, 2001 which came into force on 1-7-2001 based upon the cost of manufacture. The notices issued to the applicant alleged that, while determining the manufacturing cost, it had taken into account the administrative overhead and the margin of profit. They alleged that the applicant has not complied with the requirement of the guidance notes contained in the Institute of Costs and Works Accountants of India (ICWAI) in July, 1997 and revised in April, 1998. They relied upon the circular 258/92/96-CX, dated 30-10-1996 of the Board. It is on adjudication of this notice that the demand has been confirmed and penalty imposed.
4. The contentions in the application are as follows. The Board's circular 692/08/2003-CX, dated 13-2-2003 has said that the cost of production is to be determined in accordance with the costing standard CAS-4 issued by the ICWAI. These standards state at Paragraph 5.7 that administrative overheads relating to activities other than manufacturing activities will be excluded from the cost of production. This requirement binds the department and a contrary view cannot be taken. It is contended that proportionate head office expenses has already been included and that if the Commissioner's view has to be accepted, addition such as foreign travel, house rent, etc., could be included. Decisions of the Tribunal in Hindustan Tyres v. CCE - 1988 (34) E.L.T. 324, GEC Alsthom India Ltd v. CCE, 1997 (96) E.L.T. 473 and Cadbury India Ltd v. Commissioner - 2001 (135) E.L.T. 510 were cited in support. It is further contended that there was no conscious and deliberate attempt to evade duty and therefore the larger period of limitation invoked in the notice cannot be sustained and penalty also cannot be imposed.
5. The departmental representative, who reiterates the finding of the Commissioner. He further points out that the Board's circular of 2003 attract the captively consumed capital goods and therefore would not apply to the goods under consideration if they are not capital goods. He contends that there is no evidence to show that the overhead expenses related to the manufacture have not in fact been included. He cites the statement of Michael Vegas, a Manager of the appellant to say that the applicant did not take into account head office expenses.
6. We do not find that the Board's circular of 2003 comes into the picture. It relates to valuation of captively consumed goods. The goods under consideration by us are not capital goods. It is not possible to agree that element of administrative overhead which relates to the cost of manufacture have been taken into account. In his statement Michael Vegas, a Manager of the applicant, has said that the applicant had taken the total of standard cost, material, labour and factory overhead, packing charges and manufacturing profit. It is clear from this that the applicant has not included the head office expenses in relation to purchase of material related to activities resulting in the manufacture of the goods including procurement of raw material. The decisions relied upon by the applicant do not support the view that the administrative expenses are not to be included. Manufacturing cost would include all cost incurred on account of manufacture of the goods such as procurement of raw material, payment to labour, maintenance of machinery, up keep of the factory, etc. It appears that these expenses have not been included. While there may be doubt as to the actual quantum, the principle prima facie has not been followed. Vigas admitted that he was aware that the expenses have been made good. There is no satisfactory explanation as to why, if this were the case, why it were not included. In these circumstances, the applicability of the extended period of limitation and imposition of penalty. It has not been shown that these expenses having been included. There is no material in support placed before us in the stay application. Financial hardship is not pleaded.
7. Taking these aspects into consideration, we think it appropriate to ask the applicant to deposit Rs. 1.25 crore towards duty and penalty within a month from the receipt of this order, whereupon we waive deposit of the remaining duty and penalty and stay their recovery.
8. Compliance on 2-12-2003.